Tencent Holdings Limited — Proxy Solicitation & Information Statement 2006

Oct 26, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular, you should consult your stockbroker, or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Daqing Petroleum and Chemical Group Limited 大慶石油化工集團有限公司, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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DAQING PETROLEUM AND CHEMICAL GROUP LIMITED 大慶石油化工集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 0362)

PROPOSED RE-ELECTION OF DIRECTORS AND

GENERAL MANDATES TO ISSUE SHARES AND TO PURCHASE ITS OWN SHARES AND REFRESHMENT OF THE LIMIT OF THE EXISTING SHARE OPTION SCHEME AND AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND NOTICE OF ANNUAL GENERAL MEETING

A notice convening the annual general meeting of Daqing Petroleum and Chemical Group Limited to be held at The Ritz-Carlton, Hong Kong, 3 Connaught Road, Central, Hong Kong on 7 December 2006, Thursday at 4:30 p.m. is set out on pages 14 to 17 of this circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon and lodge the same with the Branch Share Registrar in Hong Kong of Daqing Petroleum and Chemical Group Limited, Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not less than 48 hours before the time fixed for holding the meeting or any adjournment thereof.

Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof if you so wish.

26 October 2006

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board
–	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
–	Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
–	General Mandate to Issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
–	General Mandate to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
–	Refreshment of the Existing Scheme Mandate Limit . . . . . . . . . . . . . . . . . .	6
–	Amendments to the Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . .	8
–	Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
–	Procedure to Demand a Poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
–	Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
–	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix I	– Details of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix II – Explanatory Statement on the Repurchase Mandate . . . . . . . . . . . .		11
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		14

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

“AGM”	the annual general meeting of the Company to be held
	at The Ritz-Carlton, Hong Kong, 3 Connaught Road,
	Central, Hong Kong on 7 December 2006, Thursday at
	4:30 p.m., notice of which is set out on pages 14 to 17
	of this circular
“Annual Report”	the annual report of the Company for the year ended
	30 June 2006
“Articles of Association”	the articles of association of the Company
“associates”	has the meaning as defined in the Listing Rules
“Board”	the board of directors of the Company
“Cayman Islands Companies Law” the Companies Law (Law 3 of 1961, as consolidated
	and revised) of the Cayman Islands
“Companies Ordinance”	Companies Ordinance, Chapter 32 of the Laws of Hong
	Kong
“Company”	Daqing Petroleum and Chemical Group Limited大慶
	石油化工集團有限公司, a company incorporated in the
	Cayman Islands with limited liability, the Shares of
	which are listed on the Stock Exchange
“connected person(s)”	has the meaning as ascribed to it in the Listing Rules
“Director(s)”	the director(s) of the Company for the time being
“Eligible Participants”	any employee or executive (including executive
	director, non-executive director and independent non-
	executive director of the Group or any Invested Entity),
	supplier of goods or services, customer, any person or
	entity that provides research, development or other
	technological support, Shareholders, advisers or
	consultants relating to business development, and joint
	venture partner or counterparty to business
	transactions to the Group or any Invested Entity

– 1 –

DEFINITIONS

• “Existing Scheme Mandate Limit” 10% of the issued share capital of the Company as at the date of adoption of the Existing Share Option Scheme which may be issued upon exercise of all options to be granted under the Existing Share Option Scheme and any other share option schemes of the Group

• “Existing Share Option Scheme” the existing share option scheme of the Company approved by the Shareholders of the Company at the extraordinary general meeting held on 18 November 2002

• “First Refreshed Limit” the scheme mandate limit under the Existing Share Option Scheme which set out the maximum number of share options to be granted by the Company refreshed by the Shareholders on 2 December 2005, being 10% of the issue share capital of the Company as at 2 December 2005

• “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Initial Limit” the initial scheme mandate limit under the Existing Share Option Scheme which set out the maximum number of share options to be granted by the Company at the time of adoption of the Existing Share Option Scheme, being 10% of the issued share capital of the Company at the time of adoption of the Existing Share Option Scheme

“Invested Entity” any entity in which any member of the Group holds any equity interest “Issue Mandate” the general and unconditional mandate proposed to be granted to the Directors to allot, issue and deal with Shares with an aggregate nominal amount not exceeding 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of the relevant resolution approving this issue mandate at the AGM, which is extended by the addition of the number of Shares repurchased under the Repurchase Mandate

– 2 –

DEFINITIONS

“Latest Practicable Date” 11 October 2006, being the latest practicable date prior to the printing of this circular for ascertaining certain information of this circular “Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited “Repurchase Mandate” the general and unconditional mandate proposed to be granted to the Directors to repurchase Shares with an aggregate amount of which shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of the relevant resolution approving this repurchase mandate at the AGM

“SFO” the Securities and Futures Ordinance “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company “Shareholder(s)” holder(s) of Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers “HK$” Hong Kong dollars, the lawful currency of Hong Kong

– 3 –

LETTER FROM THE BOARD

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DAQING PETROLEUM AND CHEMICAL GROUP LIMITED 大慶石油化工集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 0362)

Executive Directors: Chan Yuk Foebe Chiau Che Hong Peng Zhanrong

Independent non-executive Directors: Ma Wing Yun Bryan Meng Fanxi Yau Chung Hong

Registered Office: Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies

Principal Place of Business: Room 1818, 18/F. Hutchison House 10 Harcourt Road Hong Kong

26 October 2006

To the Shareholders of the Company

Dear Sir or Madam,

PROPOSED RE-ELECTION OF DIRECTORS AND

GENERAL MANDATES TO ISSUE SHARES AND TO PURCHASE ITS OWN SHARES AND

REFRESHMENT OF THE LIMIT OF THE EXISTING SHARE OPTION SCHEME AND

AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with information regarding the resolutions to be proposed at the AGM which, upon approval, would enable the Company to:

• (a) re-elect the retiring Directors;

• (b) grant the Issue Mandate;

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LETTER FROM THE BOARD

• (c) grant the Repurchase Mandate;

• (d) extend the Issue Mandate set out in (b) above by an amount representing the aggregate amount of the Shares repurchased by the Company pursuant to the Repurchase Mandate set out in (c) above;

• (e) refresh the Existing Scheme Mandate Limit; and

• (f) amend the Articles of Association.

RE-ELECTION OF DIRECTORS

In accordance with Articles 108 and 112 of the Company’s Articles of Association, Mr. Peng Zhanrong and Mr. Chiau Che Kong will retire from office by rotation and be eligible for re-election at the AGM. Details of Mr. Peng Zhanrong and Mr. Chiau Che Kong required to be disclosed by the Listing Rules are set out in the Appendix I of this circular.

GENERAL MANDATE TO ISSUE SHARES

At the AGM, it will be proposed, by way of ordinary resolution, that the Directors of the Company be given a general and unconditional mandate to allot, issue and deal with Shares with an aggregate nominal amount up to 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of such resolution. Such mandate will give the Director greater flexibility to issue new Shares when it is in the interests of the Group and the Shareholders as a whole. In addition, it will be further proposed, by way of a separate ordinary resolution, that the Issue Mandate be extended by adding to it the number of Shares repurchased under the Repurchase Mandate referred to below. Any issue of new Shares in the Company is subject to approval from the Stock Exchange for the listing of and permission to deal such new Shares.

GENERAL MANDATE TO REPURCHASE SHARES

At the AGM, it will also be proposed, by way of ordinary resolution, that the Directors of the Company be given a general and unconditional mandate to repurchase Shares of the Company with an aggregate nominal amount not exceeding 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing such resolution.

Pursuant to the Listing Rules, the Company is required to provide you with the requisite information which is reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolution relating to the Repurchase Mandate. An explanatory statement for such purpose is contained in the Appendix II to this circular.

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LETTER FROM THE BOARD

REFRESHMENT OF THE EXISTING SCHEME MANDATE LIMIT

The Existing Share Option Scheme was adopted by the resolution passed by the Shareholders at the extraordinary general meeting of the Company held on 18 November 2002. The purpose of the Existing Share Option Scheme is to enable the Company to provide incentives or rewards to the Eligible Participants for their contribution to the Group.

Under the Existing Share Option Scheme, the Directors were authorized to grant options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the exercise of options granted under the Existing Share Option Scheme. The Company may grant options of up to the Initial Limit, i.e. 10% (equivalent to 87,300,000 Shares) of the issued share capital of the Company as at the date of adoption of the Existing Share Option Scheme. Under the Initial Limit, options carrying the rights to subscribe for 20,000,000 Shares were granted and 13,000,000 of which were exercised (representing approximately 0.62% of the issued share capital of the company as at the Latest Practicable Date). 7,000,000 share options granted under the Initial Limit of the Existing Share Options Scheme were lapsed during the year ended 30 June 2006.

At the annual general meeting of the Company held on 2 December 2005, the Initial Limit was refreshed and the First Refreshed Limit was approved by the Shareholders. Pursuant to the First Refreshed Limit, the Company may grant options under the Existing Option Scheme up to 10% of the issued share capital of the Company at 2 December 2005, i.e. not exceeding 166,441,000 Shares. Up to the Latest Practicable Date, options carrying the rights to subscribe for 166,100,000 Shares have been granted under the First Refreshed Limit and 98,330,000 of which were exercised during the year ended 30 June 2006.

As at the Latest Practicable Date, there remain 67,770,000 share options outstanding and unexercised under the Existing Share Option Scheme, which entitle their respective holders to subscribe for a total of 67,770,000 share options (representing approximately 3.22% of the issued share capital of the Company as at the Latest Practicable Date). Options, if not granted under the First Refreshed Limit, will not be granted in the future upon the approval of the refreshment of the Existing Scheme Mandate Limit in the AGM.

Apart from the Existing Share Option Scheme, the Company has no other share option scheme currently in force. The Directors consider that the Company should refresh the Existing Scheme Mandate Limit so that the Company could have more flexibility to provide incentives to those Eligible Participants of the Existing Share Option Scheme by way of granting share options to them. If the refreshment of the Existing Scheme Mandate Limit is approved at the AGM, based on the 2,101,540,000 Shares in issue as at the Latest Practicable Date and assuming no further Shares will be allotted and issued and no Shares will be repurchased after the Latest Practicable Date and up to the date of the AGM, the Company will be allowed to grant options under the Existing Share Option Scheme for subscription of up to a total of 210,154,000 Shares, representing 10% of the issued share capital of the Company as at the date of the AGM.

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LETTER FROM THE BOARD

The following table shows the details of the share options granted/exercised/ lapsed/outstanding under the Existing Share Option Scheme up to the Latest Practicable Date:

		Under
	Under	First
	Initial	Refreshed
	Limit	Limit	Total
No. of Options Granted	20,000,000	166,100,000	186,100,000
No. of Options Exercised	13,000,000	98,330,000	111,330,000
No. of Options Lapsed	7,000,000	–	7,000,000
No. of Outstanding Options	–	67,770,000	67,770,000

So far as the Company is aware, there is no grantee under the Existing Share Option Scheme be granted with options which exceed the limit of 1% of the issued share capital of the Company in the 12-month period up to and including the date of grant as set out in Rule 17.03(4) of the Listing Rules.

The maximum number of Shares to be issued upon exercise of all outstanding options granted and yet to be exercised under the Existing Share Option Scheme and any other share option scheme of the Group must not in aggregate exceed 30% of the issued share capital of the Company from time to time. The Directors consider that the refreshment of the Existing Scheme Mandate Limit is in the interests of the Group and the Shareholders as a whole because it enables the Company to reward and motivate the Eligible Participants under the Existing Share Option Scheme.

The refreshment of the Existing Scheme Mandate Limit is conditional upon:

• (i) the passing of the ordinary resolution at the AGM;

• (ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in any new Shares which may fall to be allotted and issued upon the exercise of the subscription rights attaching to the options that may be granted under the refreshed limit of the Existing Share Option Scheme up to 10% of the issued share capital of the Company as at the date of passing of the ordinary resolution at the AGM; and

• (iii) the submission of the application Form C1 by the Company to the Stock Exchange.

The documents of the Existing Share Option Scheme are available for public inspection at the head office of the Company in Hong Kong at Room 1818, 18/F., Hutchison House, 10 Harcourt Road, Hong Kong for the period from the date of this Circular, i.e. 26 October 2006 to 14 days thereafter, i.e. 10 November 2006.

– 7 –

LETTER FROM THE BOARD

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The Directors wish to propose a special resolution at the AGM to amend the Articles of Association of the Company to ensure its compliance with paragraph 4(3) of Appendix 3 and paragraph 5(1) of Appendix 13B of the Listing Rules and section 157B of the Companies Ordinance. The main amendment is to enable the Company to remove any Director by way of ordinary resolution.

A full text of the proposed amendments to the Articles of Association is contained in resolution no. 5 of the notice of AGM as set out on pages 14 to 17 of this circular.

ANNUAL GENERAL MEETING

A notice of the AGM is set out on pages 14 to 17 of this circular. A form of proxy for use at the AGM is enclosed with this circular. To be valid, the form of proxy must be completed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or other authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the AGM or any adjournment thereof. Completion and delivery of the form of proxy will not preclude Shareholders from attending and voting at the AGM or any adjournment thereof if they so wish.

PROCEDURE TO DEMAND A POLL

In accordance with Article 72 of the Articles of Association, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless voting by way of poll is required by the Listing Rules or (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:

• (a) by the chairman of the meeting; or

• (b) by at least three Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (c) by any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or

• (d) by any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and holding Shares in the Company conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right; or

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LETTER FROM THE BOARD

• (e) if required by the Listing Rules, by any Director or Directors who, individually or collectively, hold proxies in respect of Shares representing five per cent. or more of the total voting rights at such meeting.

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

RECOMMENDATION

The Directors consider that the proposed re-election of Directors, the granting of the Issue Mandate and Repurchase Mandate, the extension of the Issue Mandate, refreshment of the Existing Scheme Mandate Limit and amendments to the Articles of Association are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of all the relevant resolutions to be proposed at the AGM.

Yours faithfully, For and on behalf of the Board

Daqing Petroleum and Chemical Group Limited Chan Yuk Foebe

Chairman

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APPENDIX I

DETAILS OF DIRECTORS

Details of the Directors proposed to be re-elected are as follows:

Mr. Peng Zhanrong ( 彭展榮 ), aged 36, is an executive director of the Company and joined the Company in February 2004. Mr. Peng is responsible for overseeing the operation of the Company’s investment in Mudanjiang, Heilongjiang Province, the PRC. Mr. Peng graduated from the South China University of Technology majoring in chemical engineering in the PRC. Mr. Peng has over 10 years’ experience in the auto and petroleum industries in the PRC prior to joining the Company in February 2004. Mr. Peng is also an Executive Director of Heng Tai Consumables Group Limited, a listed company on the Stock Exchange.

As at the Latest Practicable Date, Mr. Peng does not have any interests in the Shares of the Company within the meaning of Part XV of the SFO. He is entitled to a director’s emolument of HK$20,000 per month which is determined by the Board by reference to his duties and responsibilities with the Company and the market rate, and will be reviewed by the Board from time to time. He is not entitled to any other emoluments. The proposed term of appointment of Mr. Peng as the Executive Director is three years. Mr. Peng does not have any relationships with any Director, senior management or substantial or controlling shareholder (as defined in the Listing Rules) of the Company.

So far as the Company is aware and save as disclosed above, there is no other information that needs to be brought to the attention of the Stock Exchange and the Shareholders regarding the election of Mr. Peng under Rule 13.51(2) of the Listing Rules.

Mr. Chiau Che Kong ( 周志剛 ), aged 38, is an executive director of the Company. Mr. Chiau has over 10 years’ experience in the trading industry of consumer products in Hong Kong and PRC prior to joining the Group in February 2004 as marketing manager. Mr. Chiau was appointed as executive director on 14 December 2005 and is responsible for the Group’s administration and business development. Mr. Chiau is also an Executive Director of Heng Tai Consumables Group Limited, a listed company on the Stock Exchange.

As at the Latest Practicable Date, Mr. Chiau holds 6,000,000 shares in the Company. Save as disclosed above, as at the Latest Practicable date, Mr. Chiau does not have any other interests in the Shares of the Company within the meaning of Part XV of the SFO. Mr. Chiau is entitled to an emolument of (a) HK$18,000 per month with effect from 14 December 2005; and (b) all reasonable out of pocket expenses properly incurred by him in connection with the performance of his duties as an executive director of the Company. Mr. Chiua’s emolument are determined by the Board with reference to the prevailing market conditions. Mr. Chiau does not have any relationships with any Director, senior management or substantial or controlling shareholder (as defined in the Listing Rules) of the Company.

So far as the Company is aware and save as disclosed above, there is no other information that needs to be brought to the attention of the Stock Exchange and the Shareholders regarding the election of Mr. Chiau under Rule 13.51(2) of the Listing Rules.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

This Appendix serves as an explanatory statement, as required by the Listing Rules, to provide you with the requisite information relating to the Repurchase Mandate to be proposed at the AGM.

1. Reasons for Repurchase Mandate

Although the Directors have no present intention of repurchasing any Shares, they believe that the flexibility afforded by the Repurchase Mandate would be beneficial to the Company and its Shareholders. Trading conditions on the Stock Exchange have sometimes been volatile in recent years. At any time in the future when Shares are trading at a discount to their underlying value, the ability of the Company to repurchase Shares will be beneficial to those Shareholders who retain their investment in the Company since their percentage interest in the assets of the Company would increase in proportion to the number of Shares repurchased by the Company and thereby resulting in an increase in net assets and/or earnings per Share of the Company. Such repurchases will only be made when the Directors believe that such repurchases will benefit the Company and its Shareholders.

2. Share Capital

As at the Latest Practicable Date, the issued share capital of the Company comprised 2,101,540,000 Shares.

Subject to the passing of the Repurchase Mandate (ordinary resolution no. 4B), the Company would be allowed under the Repurchase Mandate to repurchase Shares up to a maximum of 210,154,000 Shares on the basis that no further Shares will be issued or repurchased prior to the date of the AGM.

3. Funding of Repurchase

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with the memorandum and Articles of Association of the Company, the Cayman Islands Companies Law and the Listing Rules, including but not limited to profits of the Company or the proceeds of a fresh issue of Shares made for the purpose of the repurchase.

There might be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the annual report for the year ended 30 June 2006) in the event that the Repurchase Mandate was to be carried out in full at any time during the proposed repurchase period. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are purchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

4. Market Prices

The highest and lowest prices at which the Shares have been traded on the Stock Exchange during each of the previous twelve months prior to the Latest Practicable Date are as follows:

		Shares
	Highest		Lowest
	HK$		HK$
2005
October	0.390		0.320
November	0.380		0.330
December	0.380		0.340
2006
January	0.450		0.355
February	0.540		0.445
March	0.540		0.455
April	0.610		0.465
May	0.650		0.500
June	0.540		0.480
July	0.500		0.390
August	0.435		0.345
September	0.415		0.370
October (up to the Latest Practicable Date)	0.410		0.375

5. Share Repurchase made by the Company

No purchase of Shares has been made by the Company during the last six months preceding the Latest Practicable Date (whether on the Stock Exchange or otherwise).

6. Undertaking

The Directors have undertaken to the Stock Exchange to exercise the powers of the Company to make purchases under the Repurchase Mandate in accordance with the Listing Rules, the memorandum and Articles of Association of the Company and the Cayman Islands Companies Law.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates, presently intends to sell Shares to the Company under the Repurchase Mandate in the event that Repurchase Mandate is approved by the Shareholders.

No connected persons of the Company has notified to the Company that they have a present intention to sell any Shares, or that they have undertaken not to sell any Shares held by them to the Company in the event that the Repurchase Mandate is approved by its Shareholders.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

7. Takeovers Code

If on the exercise of the Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of Rule 32 of the Takeovers Code. As a result, a Shareholder or group of Shareholders acting in concert could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with rules 26 and 32 of the Takeovers Code.

As at the Latest Practicable Date and based on the information available to the Company, Heng Tai Consumables Group Limited, the single largest shareholder of the Company, was beneficially interested in 279,340,000 Shares, representing 13.29% of the issued share capital of the Company. In the event that the Directors exercise in full the Repurchase Mandate, the shareholding of Heng Tai Consumables Group Limited in the Company will be increased to approximately 14.77% of the issued share capital of the Company.

Based on the information available to the Company as at the Latest Practicable Date, The Directors are not aware of any consequences which may arise under the Takeovers Code as a result of any repurchases made under the proposed resolution.

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NOTICE OF ANNUAL GENERAL MEETING

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DAQING PETROLEUM AND CHEMICAL GROUP LIMITED 大慶石油化工集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 0362)

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an annual general meeting of Daqing Petroleum and Chemical Group Limited (the “Company”) will be held at The Ritz-Carlton, Hong Kong, 3 Connaught Road, Central, Hong Kong on 7 December 2006, Thursday at 4:30 p.m. for the purpose of considering and, if thought fit, passing the following resolutions:

ORDINARY RESOLUTIONS

1. to receive and consider the audited consolidated financial statements and the reports of the directors of the Company (the “Directors”) and the auditors for the year ended 30 June 2006;

2. (a) to re-elect the following persons as Directors:

   • (i) Mr Peng Zhanrong

   • (ii) Mr Chiau Che Kong

3. (b) to authorise the board of directors of the Company (the “Board”) to fix the Directors’ remuneration;

4. to re-appoint Messrs. RSM Nelson Wheeler as auditors of the Company for the ensuing year and to authorise the Board to fix their remuneration;

5. as special business, to consider and, if thought fit, pass with or without amendments, the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

• A. “ THAT :

• (a) subject to paragraph (c) below, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of HK$0.01 each in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such powers be and is hereby generally and unconditionally approved;

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NOTICE OF ANNUAL GENERAL MEETING

• (b) the approval in paragraph (a) shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such powers, after the end of the Relevant Period;

• (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (a) shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution and the said approval shall be limited accordingly; and

• (d) for the purpose of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; or

• (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders in general meeting.”;

B. “ THAT :

• (a) subject to paragraph (b) below, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to purchase shares of HK$0.01 each in the capital of the Company be and is hereby generally and unconditionally approved;

• (b) the aggregate nominal amount of the shares to be purchased pursuant to the approval in paragraph (a) above shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue on the date of the passing of this resolution and the said approval shall be limited accordingly; and

• (c) for the purpose of this resolution, “Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; or

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NOTICE OF ANNUAL GENERAL MEETING

  - (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders in general meeting.”;

• C. “ THAT the general mandate granted to the Directors pursuant to resolutions nos. 4A and 4B as above and for the time being in force to exercise the powers of the Company to allot shares and to make or grant offers, agreements and options which might require the exercise of such powers referred to in resolution no. 4A be and is hereby extended by the total nominal amount of shares in the capital of the Company repurchased by the Company since the granting of such general mandate pursuant to the exercise by the Directors of the powers of the Company to purchase such shares pursuant to resolution no. 4B, provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution”;

• D. “ THAT the existing scheme limit under the share option scheme adopted by a resolution of the shareholders of the Company on 18 November 2002 (“Share Option Scheme”) be refreshed so that the aggregate nominal amount of the shares of the Company to be allotted and issued pursuant to the grant or exercise of the options under the Share Option Scheme (excluding options previously granted, outstanding, cancelled, lapsed or exercised under the Share Option Scheme) shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution (“Refreshed Scheme Limit”) and that the Directors be and are hereby authorised, subject to compliance with the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time), to grant options under the Share Option Scheme up to the Refreshed Scheme Limit and to exercise all the powers of the Company to allot, issue and deal with shares of the Company pursuant to the exercise of such options”;

• as special business, to consider and, if thought fit, pass with or without amendments, the following resolutions as special resolutions:

SPECIAL RESOLUTIONS

“ THAT :

the articles of association of the Company be and are hereby amended in the following manner:

• (a) by replacing “a Special Resolution” with “an Ordinary Resolution” in paragraph(vii) of Article 105 so that this paragraph becomes:

• (vii) if he shall be removed from office by an Ordinary Resolution of the Company under Article 114.

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• (b) by replacing “Special Resolution” with “Ordinary Resolution” in Article 114 so that this article becomes:

• The Company may by Ordinary Resolution remove any Director (including a Managing Director or other Executive Directors) before the expiration of his period of office notwithstanding anything in these Articles or in any agreement between the Company and such Director (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and may elect another person in his stead. Any person so elected shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election, but shall not be taken into account in determining the Directors or the number of Directors who are to retire by rotation at such meeting.”

By Order of the Board TSANG CHIU HUNG Secretary

Hong Kong, 26 October 2006

As at the date hereof, Ms. Chan Yuk Foebe, Mr. Chiau Che Hong and Mr. Peng Zhanrong are the executive Directors and Mr. Ma Wing Yun Bryan, Mr. Meng Fanxi and Mr. Yau Chung Hong are the independent non-executive Directors.

Notes:

• (a) A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

• (b) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or other authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not less than 48 hours before the time fixed for holding the meeting or at any adjournment thereof.

• (c) A circular containing an explanatory statement regarding items (4A) to (4D) and 5 above will be sent to members of the Company together with the 2006 Annual Report.

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